Thoughts on Corporate Secrecy

by Roger Bourke White Jr., copyright February 2012

Introduction

This essay was inspired by reading the 18 Jan 12 Fortune article, The Secrets Apple Keeps by Adam Lashinsky, about Apple's culture of corporate secrecy. The secrecy policies of a company are very much a part of its culture and can vary widely from company to company, and can swing widely as a company evolves. I personally experienced a wild swing in secrecy policies as Novell underwent its "Corporate Phase Shift" (my term) in 1989/90 as the visionaries were cast out and the manager-types took their place in top management circles. (Read further about this in the last part of my book Surfing the High Tech Wave: A history of Novell 1980-90)

Reading this article brought back memories... and reawakened opinions.

Background

Keeping company secrets dates back into prehistory. Artisans and merchants have routinely kept secrets of their processes and customers, and been keenly interested in information on competitor's processes and customers. In addition to real life issues, this phenomenon shows up as a plot element in stories which involve merchants, and being part of story telling indicates it has a strong emotional component. An iconic trade secret is the formula for Coca-cola. An iconic story involving trade secrets is Oliver Stone's Wall Street (1987).

As the Industrial Age developed, the tradeoffs for secrecy policies shifted and community law-making got more involved. Patents, copyrights, trademarks, retail trade practices and food/drug/cosmetic ingredient disclosures are places were community laws and company secrecy now interact.

Another contemporary element of company secrecy is NDA's -- Non-Disclosure Agreements. These are passed around widely in high-tech company circles.

The Problems Created by High Secrecy

In the Information Age, the age we are living in now, there are many compelling reasons to not keep secrets. The foremost one is the benefits of coordination. There is a lot more variety in our age than in previous ages and a lot more information flowing. As the complexity of the world we live in grows the benefits of coordinating efforts grows.

This applies at the company level as much as at every other. If information flows freely employees know what's happening elsewhere in the company, customers are thinking, and they can do a lot more low cost, low risk, flexible experimenting to smooth production within the company and match products and services to customer desires. They can also be more aware of what's happening elsewhere in the marketplace -- if an interesting idea pops up, they can find out about it quickly and incorporate it quickly.

High levels of secrecy gum up these benefits. Beyond that, they make incompetence, collusion, fraud, and other forms of "cheap shotting" the community (the company and customers) much easier to conceal.

In spite of these benefits and problems, there are circumstances where high levels of secrecy can produce good results. Apple's culture is a contemporary good example.

The Justifications for High Secrecy

The magazine article says that Apple justifies its high levels of secrecy as follows:

"The aversion to prerelease publicity is a constant at Apple. Phil Schiller, Apple's powerful senior vice president of product marketing, has been known to compare an Apple product launch to a blockbuster Hollywood movie opening weekend. There is tremendous emphasis on the product's first few days, akin to a film's opening weekend. Releasing details ahead of time would dampen the suspense."

and

"Most important, announcing products before they are ready gives the competition time to respond, raises customer expectations, and opens a company up to the carping of critics who are bashing an idea rather than an actual product. Companies that fail to grasp the power of secrecy do so at their peril."

In the case of Apple under Jobs this thinking has worked.

Conclusion

So, when does high secrecy work and produce Apple-like miracles, and when does it fail and produce face-palming gaffes and bumbles?

The main key to success is that top leadership has to know what's right and what's wrong... and they have to be right about this. This often happens in conjunction with a leadership cult, ala Jobs, but other variants are possible. IBM in the 1960's and 70's was secretive and did quite well without a leadership corps as flamboyant as Jobs.

Another key is that the specific concepts which are keys to success in the industry are not widely known. No one, other than Jobs, knew that the mix of features in the iPad, iPhone, and the other successors would be the hot mix until Apple proved it was so. If the industry is well understood by most participants, such as, say, in dry cleaning, then secrecy will not be so valuable.

In conclusion, high levels of secrecy can work, and work spectacularly well. But the times and situations where this happens are far from universal.